Stock Market Soars to New Heights
The S&P 500 has reached unprecedented territory, breaching the 6,000 mark for the first time in history. This milestone follows a surge in stock prices post-U.S. presidential election, driven by expectations of a more business-friendly administration.
A Breakout Above the Wedge
Technical analysis reveals that the index has broken out of a rising wedge pattern, a bullish sign that could propel prices even higher. Notably, this breakout was accompanied by above-average trading volumes, indicating strong buying conviction from institutional investors and asset managers.
Upside Potential
Using the measured move technique, we can project a price target of 6,500 for the S&P 500. This calculation involves adding the distance between the rising wedge’s trendlines to the initial breakout area. Interestingly, this target aligns with a bars pattern price target, which suggests a similar upside potential.
Support Levels to Watch
As the market continues its upward trajectory, investors should keep a close eye on key support levels. The 5,900 level, near the rising wedge’s top trendline and breakout point, could attract significant support. A breakdown below this level could lead to a retracement towards 5,670, where a trendline converges with several peaks and troughs within the rising wedge pattern.
Market Sentiment
The Federal Reserve’s decision to reduce its benchmark lending rate has boosted market sentiment, adding to the post-election rally. With the S&P 500 already up 25% this year, investors are optimistic about the prospects of a business-friendly White House and Congress.
Caution Ahead
While the relative strength index (RSI) confirms bullish price momentum, it also warns of potential short-term profit taking as the indicator approaches overbought levels. Investors should remain cautious and monitor market developments closely.
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